Militiamen in Baghdad are handing over their heavy weapons in a deal to bring peace to a poverty-stricken area of the capital. In the meantime, car bomb making factories were discovered north of Baghdad following the re-taking of the city of Samarra.

Mehdi militiamen, loyal to Iraqi Shiite cleric Moqtada al-Sadr, began honoring a deal with the interim government to hand over their medium and heavy weapons in the impoverished Baghdad suburb of Sadr City.

Militiamen showed up at local police stations with mortars, machine guns, and rocket-propelled grenade launchers.

In return, they will eventually receive cash for the weapons, along with amnesty for those who have not committed crimes and a chance to take part in Iraq's political process.

The militia must hand over control of Sadr City to Iraqi police and the National Guard. About two million people live in Sadr City, most of them Shiites.

Iraq's interim Prime Minister, Iyad Allawi, said nothing less than full adherence to the law will be tolerated.

"Only the rule of law will prevail," said Mr. Allawi. "Nothing less is accepted. We have been talking to religious leaders, the head of the tribes in Sadr City, and we made it very clear any weapons present outside the rule of law is unacceptable. They have to surrender their weapons."

Sadr City has been the scene of fighting in recent weeks that included U.S. forces launching precision air strikes against insurgent targets.

Interim government officials had said regaining control of the Baghdad slum was critical to paving the way for open elections in January.

Interim government officials said they will spend as much as $500 million on reconstruction projects in Sadr City, if peace prevails.

In the meantime, the interim prime minister traveled north of Baghdad to the city of Samarra, where insurgents recently fought against coalition and Iraqi forces. According to Mr. Allawi, Iraqi forces discovered factories for rigging car bombs.

"They did find a lot of explosives, arms, and even makeshift factories to booby-trap cars and to fit explosives into cars. These places belonged to non-Iraqis, to people who come from other areas in the region," he added.

Mr. Allawi said he went to Samarra to meet with local leaders and the commanders of the military and police who said they were determined to bring peace to the area.

According to Mr. Allawi, the interim government intends to spend about $25 million on reconstruction projects in Samarra that could begin as early as this week.